FEDERAL LAW NO. (1) FOR THE YEAR 1981

INCORPORATING THE REAL ESTATE BANK

We, Zayed Bin Sultan Al Nahyan, President of the United Arab Emirates;
After perusal of the provisions of the Provisional Constitution; and Federal Law No. (1) for the year 1972, concerning the Ministries’ authorities and Ministers’ powers, as amended; and Pursuant to the proposal of the Minister of Finance and Industry, and the approval of the Council of Ministers and that of the Federal National Council, and ratification of the Federal Supreme Council;

Have Promulgated the following:

Article (1):
A bank shall be incorporated in the name of “Real Estate Bank”, to be a public establishment having an independent corporate personality and to be appended to the Ministry of Finance, hereinafter referred to as “The Bank”.

Article (2):
The Bank’s head office shall be located in the capital of the State, and it may open branches in the Emirates and appoint agents and correspondents for it outside the State. The Bank may also assign natural persons to act on its behalf and carry out some of its business in accordance with its Articles of Association.

Article (3):
The Bank shall, in accordance with the terms and conditions stipulated in its Articles of Association, provide real estate credit in the United Arab Emirates to the UAE citizens, establishments, companies and cooperative societies whose full capital or at least 80% thereof is owned by the Government or by UAE citizens within the frame of the economic and social development plan in the State.

The Bank may, for the purpose of achieving its objectives, carry out the following:

1. Own and dispose of immovable and movable properties in both following events:-

Immovable and movable properties allocated for its head office and branches pertaining thereto.
Immovable and movable properties devolving thereupon in implementation of Article 16 of this Law.

2. Provide loans to the UAE citizens, establishments, companies and cooperative societies whose full capital or at least 80% thereof is owned by the Government or by UAE citizens, in order to execute real estate projects according to the conditions stipulated in this Law, in addition to those conditions which may be determined by the Board of Directors.

3. Settle the real estate fixed debts due by UAE citizens to banks and financial institutions, which have financed the construction of UAE citizens’ properties allocated for commercial exploitation, whenever such real estates have been built within the State and whenever their construction contracts concluded with the banks have a fixed date and prior to the first of January 1978.

4. Guarantee UAE citizens, companies, establishments and cooperative societies in real estate loan contracts, and provide real estate investment operations according to the conditions and circumstances approved by the Board of Directors.

5. Assist the owners of real estate projects in whatever studies, researches, organization, technical or administrative expertise they may need.

6. Accept the deposits and carry out banking and other financial transactions which may be related to the Bank’s objects, according to the conditions and circumstances approved by the Board of Directors.

7. Issue and deal with real estate bonds, or mortgage bonds to be settled in their nominal value or to that value to which is added the premium and conditions determined by the Board of Directors.

8. Borrow from the Government without commission for personal housing purposes, and with a commission not exceeding 1% for commercial exploitation purposes.

9. Lend without commission or guarantors for personal housing purposes, and with a commission not exceeding 4% for commercial exploitation purposes, with a maximum ceiling of Dhs. 15,000,000 (Dirhams Fifteen Million).

10. Borrow from the Stock Market to realize its objects.

11. Execute real estate housing or commercial projects on behalf of the Federal Government or of the Government of any Emirate.

12. Manage real estates for its own account or for the account of others, and carry out all the acts which may be required for such management.

13. Act as trustee and proxy, accept agencies, appoint agents with or without commission, concerning the borrowers for real estate purposes.

14. Undertake any tasks entrusted thereto by the Government.

Article (4):
1. The Bank’s capital is fixed at Dirhams 2000 m., to be subscribed in full by the Government and to be paid by the Government to the Bank upon the recommendation of the Board of Directors and the proposal of the Minister of Finance.

2. The Government may increase the capital upon the recommendation of the Board of Directors and the proposal of the Minister of Finance.

Article (5):
The Bank shall be managed by a Board of Directors composed of seven members, amongst which the Chairman and Vice-Chairman, provided that such members are UAE citizens, and have experience and know-how in real estate, financial and banking affairs.

A Federal Decree shall, pursuant to the proposal of the Minister of Finance, be issued for the constitution of the Board of Directors, and the appointment shall be for a renewable period of three years.

The constitution of the Board of Directors must comply with the principle that the Government be represented by four members, amongst which the Chairman, and that the Private Sector be represented by three members.

The Minister of finance shall, vide a resolution to be issued by him, determine the remuneration of the members of the Board of Directors.

Article (6):
The Board of Directors shall lay down the general policy of the Bank, according to the economic and social development plan in the State, which shall be aimed at achieving the Bank’s objectives, develop its business and in particular realize the following matters:-

1. Evaluate the banking policy results implemented by the Bank, in such as manner as to warrant its revision, rectification, and lay down plans for the encouragement of real estate saving and development thereof amongst all UAE citizens and entities.

2. Examine the periodical reports submitted thereto concerning the work progress in the Bank, as well as the reports related to the Bank’s financial position

3. Approve the issuance of the financial and administrative regulations governing the business carried out by the Bank, as well as the regulations organizing the personnel affairs of the Bank.

4. Approve the issuance of the borrowing list of conditions, the type and value of the security required for the loans.

5. Approve the regulations necessary for the supply and contracting works, and enter into contracts for the Bank’s projects.

6. Discuss and approve the estimated budget and final accounts before proposing same to the Minister of Finance.

7. Approve the draft projects and contracts to be concluded by the Bank, within the limits approved in the Articles of Association of the Bank.

8. Determine the principles to be relied upon in order to determine the commissions and charges of other services.

9. Approve the striking off of bad debts and adopt reserves for doubtful debts.

10. Approve the depreciation rates of the Bank’s assets.

11. Approve the reconciliation on the Bank’s rights and agree to arbitration.

Article (7):
The Board of Directors may constitute, from amongst its members, one or more committees to study the matters referred thereto according to the Articles of Association of the Bank, and the Board may, for the performance of a specific task, seek the assistance of qualified people as it may deem convenient.

Article (8):
The Board of Directors shall appoint a General Manager for the Bank, who must be qualified and experienced, and who shall attend the Board meetings without having a voting right.

The General Manager shall be answerable before the Board of Directors for the management of the Bank, he shall execute the Board’s decisions, conduct the Bank’s business and follow up thereon, and fulfill any tasks entrusted to him by the Board of Directors.

The General Manager shall represent the Bank before third parties as well as before the judicial authorities.

Article (9):
The personnel of the Bank and their employment system shall be in accordance with the conditions and circumstances approved by the Board of Directors, without compliance with the Governmental laws and regulations.

Article (10):
In order for the meetings of the Board of Directors to be valid, they must be attended by four of its members, amongst which the Chairman or the Vice-Chairman. The Board of Directors’ resolutions shall be adopted by the absolute majority of its members, and in the event of equality of votes, the Chairman shall have a casting vote.

Article (11):
The Vice-Chairman of the Board of Directors shall have the powers of the Chairman when this latter is absent or is hindered from fulfilling his duties.

Article (12):
1. The Board of Directors shall hold an ordinary meeting at least once a month.

2. The Chairman may invite the Board to a meeting every time there is necessity therefor, and he must invite the Board to convene whenever he is requested to do so by the Minister or by at least three members of the Board.

3. The Chairman shall preside at the meetings and deliberations of the Board, and cause minutes to be drawn for each meeting, indicating the names of the attending persons and the decisions adopted by the Board, and the Chairman shall sign on such minutes.

Article (13):
The Board of Directors may decide to accept deposits of all different kinds made by the Bank’s borrowing customers, and it may as well accept to carry out banking and financial transactions according to the conditions laid down by the said Board.

Article (14):
The deliberations of the Board of Directors shall be classified, and the members of the Board or the Bank’s personnel may not disclose same, neither may any of them have a direct or indirect interest, nor participate in any manner whatsoever in tenders, bids or commitments undertaken by the Bank or carried out for the Bank’s account.

Article (15):
The responsibility of the Board members for their acts undertaken during the financial year shall end with the approval of the budget and final account pertaining to such year by the Minister of Finance.

Article (16):
In the event where the borrower or his guarantor fails to pay the installments or commissions on the specified dates, or if he breaches the provisions of the loan agreement or of the agreement concluded with the Bank, this latter may, after taking judicial proceedings, sell or confiscate the project, real estates or properties provided by the borrower or his guarantor as security for the loan.

The Bank may keep the ownership of any real estates or plants devolved upon it for any period approved by the Board of Directors.

The Bank shall, whenever the ownership of a project devolves upon it as a result of the above mentioned judicial proceedings, enjoy all the rights of an owner.

Article (17):
The Bank may, in all cases and even if the contrary is stipulated in the loan contract, require the borrower or his guarantor, to settle the balance of the loan amount in one installment, whenever any of the following matters is proved to the Bank:-

1. That the information provided by the borrower or his guarantor in order to obtain the loan, are incorrect or false.

2. If the borrower breaches the conditions of the agreement concluded with the Bank.

3. If the borrower uses the loan for purposes other than those assigned therefor.

4. If the borrower is late in completing the project beyond the period fixed in the contract, for reasons that may not considered as being beyond the borrower’s control.

5. If reasonable causes appear creating the belief that the borrower or his guarantor shall be unable to settle the loan or that they are exposed to liquidation.

6. If the borrower or his guarantor fails to carry out the maintenance of the properties mortgaged to the Bank as a security for the loan, or if the value of the said properties drops below the amount required, and the borrower or his guarantor are unable to provide additional guarantees deemed necessary by the Bank.

7. If the borrower or his guarantor sells or mortgages the properties allocated as security for the loan, without a prior approval from the Bank.

Article (18):
The Board of Directors may exempt the borrower or his assignee from part of the debt or commissions for any justifications required by the public interest.

Article (19):
The Bank may have a reserve capital from the net profits after covering the non-reimbursable debts, the depreciation of its properties, the debts due by the Bank, and any other matters as may customarily pertain to banks accounts. The Bank shall invest any surplus funds as may be decided by the Board of Directors.

Article (20):
The Bank’s financial year shall start on the 1st of January and end on the 31st of December of each year, provided that the first financial year shall start on the effective date hereof and end on the 31st of December of the following year.

Article (21):
The Board of Directors shall appoint one or more auditors for the Bank’s accounts, who shall fulfill their duties according to the generally recognized accounting rules and principles.

The Bank’s management and personnel must provide the auditors with the data, explanations, documents and registers, they may need to fulfill their task.

The auditors must submit their report to the Board of Directors within the three months following the end of the financial year.

Article (22):
The Board of Directors shall, through the Minister of Finance, submit to the Council of Ministers, within the six months following the end of the financial year, the final accounts for the ended year, along with the auditors’ report.

The Board of Directors must provide the Government Ministries with any data or explanations required by such Ministries.

Article (23):
The Bank’s business shall be exempted from the prior control exercised by the Diwan of Accounting.

Article (24):
The Bank’s revenues and profits shall be exempted from present and future taxes and charges.

Article (25):
The Articles of Association, as well as the Executive, Financial, and Administrative Regulations, shall be issued pursuant to the recommendation of the Board of Directors, and the approval of the Minister of Finance, without any restrictions subjecting the Bank’s business and contracts related to construction projects, to the provisions of the Public Tenders Law.

Article (26):
Until the Bank’s Board of Directors is constituted as is stipulated in this Law, a provisional committee shall be formed to start carrying out the Bank’s incorporation procedures, and a resolution of the President of the State shall be issued for the constitution of the said committee and the determination of its powers and authorities.

Article (27):
The obligations, responsibilities, liabilities, powers, rights and authorities of the National Housing Council, incorporated by virtue of the Council of Ministers’ Resolution No. 3 for the year 1978, and by virtue of the Council of Ministers’ Resolution No. 6 for the year 1979, concerning the granting of loans to UAE citizens for the purpose of building dwelling houses, shall devolve upon the Bank as soon as this latter is incorporated; and the same principle shall apply to the obligations, responsibilities, liabilities, powers, rights and authorities of the Real Estate Loans Settlement Committee, pertaining to UAE citizens and due to the commercial banks operating in the State, for which was issued the Council of Ministers’ Resolution, at its Session No. 9 for the year 1980, and the Council of Ministers’ Resolution No. 2 for the year 1980, concerning the Real Estate Loans Settlement Regulation.

Article (28):
This Law repeals the Council of Ministers’ Resolution No. 3 for the year 1978, concerning the formation of the National Housing Council, the Council of Ministers’ Resolution No. 6 for the year 1979, concerning the granting of loans to UAE citizens for the construction of dwelling houses, as well as the Council of Ministers’ Resolution issued at its Session No. 9 for the year 1980, concerning the formation of the Real Estate Loans Settlement Committee for the UAE citizens, and the Councils of Ministers’ Resolution No. 2 for the year 1980, concerning the Real Estate Loans Settlement Regulation. The provisions of this Law shall prevail over any Law contradicting the provisions hereof.

Article (29):
All Ministers shall, each within the sphere of his competence, implement the provisions of this Law.

Article (30):
This Law shall be published in the Official Gazette and shall take effect as from date of promulgation.

Zayed Bin Sultan Al Nahyan

President of the United Arab Emirates

Issued by Us at the Presidential Palace in Abu Dhabi

On : 11 Shaaban 1401 A.H.
Corresponding to : 13 June 1981 A.D.